Linked here is a PDF copy of my detailed analysis of BP Plc (BP) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: This supermajor integrated oil company (formerly BP Amoco p.l.c.) is the world's second largest publicly owned oil company and the fourth largest U.S. refiner.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. BP is trading at a discount to all but 4.) above. If I exclude the high and low valuation, and average the remaining two valuations, BP is trading at a 26.3% discount. BP earns a Star for trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. BP earned a Star in 4.) above. It's one year dividend growth exceeded its 5-year growth rate. This could indicate the dividend growth rate is accelerating.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. BP earned both available Stars in this section. Its current yield of 5.40% is in excess of the high-yield MMA rate of 4.61% and its NPV MMA Diff. is $22,113.
Other: BP is NOT an S&P 500 Dividend Aristocrat or a member of The Broad Dividend Achievers™ Index. It has increased its quarterly cash dividend payments for 8 consecutive years.
Conclusion: BP earned one Star in the Fair Value section, one Star in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a total of four Stars, which rates it as a 4 Star-Buy.
For some time now I have been looking for a suitable energy company to add to my dividend income portfolio. The numbers have not worked for the companies reviewed up to this point. Though not perfect, BP's numbers have been the best so far. BP's primary blemish is a dividend cut of 20% in 2000 after a 26% dividend increase in 1999. One other concern is the 10-year average historic payout ratio is 60%. However, the last four years payout rate have been reasonable in the 30's. I will continue to perform a qualitative assessment of BP, but early indications are pointing toward a possible April purchase.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I do not own shares of BP (0.0% of my Income Portfolio).
What are your thoughts on BP?
Recent Stock Analyses:
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With the stock down 15% in the past 3 months, BP’s (BP) dividend has spiked to historic highs. At 6.5%, Royal Dutch Shell (RDS.A) is the only major oil company with a higher yield at 6.9%. Exxon (XOM) and Chevron (CVX) meanwhile both have dividends under 5%. Is BP an attractive buy for income investors? BP shares have still not recovered from the trough levels hit during the 2010 Horizon Deepwater oil spill in the Gulf of Mexico.
Despite a temporary dividend cut during the oil spill crisis, BP has proven that it can manage oil bear markets and still shell out a nice enough dividend. In the early 2000s, when oil prices were under pressure, the company was able to maintain a stable payout with a yield reaching nearly 4%. Post oil spill, BP grew its dividend by 8% a year to revert back to pre-crisis levels incredibly quickly. Regardless of BP’s willingness to support a dividend, maintaining its current payout is still reliant on an ample amount of free cash flow. Although it’s tempting to buy one of the world’s bigger companies at a near 7% dividend, it’s unlikely payments will stay that high for long. With few expense-cutting options and a free cash flow deficit when subtracting dividends, BP will have to make a dividend cut decision soon should oil prices stay where they are.
Source: Guru Focus
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For dividend income, it is tough to beat Big Oil stocks such as BP (BP_), ConocoPhillips (COP), and Royal Dutch Shell (RDS-B). What makes BP, ConocoPhillips, and Royal Dutch Shell even more attractive for long-term investors is how much more the stock prices fluctuate than the average for the market. As a result, patient investors should have the opportunity to buy when the share price is lower with the dividend yield that much higher.
Stocks with a high beta move more than the market as a whole, which has a beta of 1. When the share price drops, the dividend yield becomes that much higher. The beta for BP is 1.62. That means that the stock price moves 60% more for BP than the overall stock market. For Royal Dutch Shell, beta is 1.08. ConocoPhillips has a beta of 1.08. The dividend income component of BP, ConocoPhillips and Royal Dutch Shell really impresses. The dividend yield for BP is 4.73%. For Royal Dutch Shell, it is 4.64%. ConocoPhillips provides a stream of dividend income to its shareholders at a 4.09% rate.
Source: The Street
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Illinois Tool Works Inc. (ITW) - Yield: 3.06% - 2 Stars - Analysis
Illinois ToolWorks Inc. is a diversified manufacturer operates a portfolio of about 750 industrial and consumer businesses located throughout the world. As you can see for the information below, price is all that is keeping ITW from being a 4 Star stock:
3M Co (MMM) - Yield: 2.89% - 2 Stars - Analysis
3M Co. is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications. Like ITW above, price is all that is keeping MMM from being a 4 Star stock:
I was fortunate to purchase both of the stocks above when their prices were much lower, so I can't complain that they are no longer 4 Star buys. However, for other companies the road to fewer stars is not as appealing. Instead of a significant run up in their share price, the run up may have occurred in their debt or dividend payout percentage, or both. Here are some dividend companies and the challenges they are facing:
BP Plc (BP) - Yield: 4.67% - 1 Star
This supermajor integrated oil company (formerly BP Amoco p.l.c.) is based in London and is the world's second largest publicly owned oil company and the fourth largest U.S. refiner. With Debt to Total Capital at an acceptable level and Free Cash Flow Payout at an undesirable level, a 3 Star rating is the best BP could earn at any price.
SUPERVALU Inc. (SVU) - Yield: 4.67% - 0 Stars
SUPERVALU INC. is one of the largest U.S. food wholesalers, this company is also one of the biggest supermarket retailers in the U.S. With Debt to Total Capital at an undesirable level and Free Cash Flow Payout at an acceptable level (but with some years negative), a 3 Star rating is the best SVU could earn at any price.
The Hershey Company (HSY) - Yield: 2.89% - 0 Stars
The Hershey Company engages in the manufacture, marketing, distribution, and sale of various types of chocolate and confectionery, refreshment and snack products, and food and beverage enhancers in the United States and internationally. With both Debt to Total Capital and Free Cash Flow Payout at undesirable levels, a 2 Star rating is the best HSY could muster at any price.
Of the three, I believe BP stands the best chance of recovery. Though BP recently froze its dividend at $0.84/share (ADR), higher oil prices should lead to higher FCF and a dividend increase, it could easily add a fourth Star and once again enter the buy zone. I don't have a lot of confidence in the other two.
Before buying a stock with hopes things will soon improve, it is a good idea to run some sensitivities to see where, or if, the stock can make a recovery. Modeling is cheap, selling an undesirable stock usually isn't.
Full Disclosure: Long ITW, MMM, BP. See a list of all my income holdings here.
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Following a meeting with the President of the United States, the BP (BP) Board announces an agreed package of measures to meet its obligations as a responsible party arising from the Deepwater Horizon spill. Agreement was reached to create a $20bn claims fund over the next three and a half years on the following basis:
As a consequence of this agreement, the BP Board has reviewed its dividend policy. Notwithstanding BP's strong financial and asset position, the current circumstances require the Board to be prudent and it has therefore decided to cancel the previously declared first quarter dividend scheduled for payment on 21st June, and that no interim dividends will be declared in respect of the second and third quarters of 2010.
Source: StreetInsider.com
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This company is a promising energy play for income investors. It covers both its capital expenditures and shareholder distributions with cash flow. It has FCF upside in a rising oil environment. The company's shares remain sensibly valued. An investment in the stock yields 5.7 percent.
BP (BP) is a promising energy investment for investors that desire high, recurring dividend income and that value upside in a rising oil environment. BP has not slashed its dividend payout during the last energy downturn. BP further has the highest dividend yield in its peer group and manages to cover its capital expenditures and dividend with cash flow. Shares remain attractively valued. An investment in BP yields 5.7 percent.
Source: Seeking Alpha
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BP is yielding a sweet 8.6%, but before investors plunk down money and buy BP stock for the juicy dividend they may want to ponder if it will last. Dividend-hungry investors have long gravitated to oil stocks because oil companies throw off oodles of cash, but the costs of cleaning up BP's big spill in the Gulf of Mexico, which could run as high as $40 billion, could put the oil giant's dividend in jeopardy.
Besides eating up BP's cash stash for a dividend payout, BP could face political pressure to stop paying billions of dollars to greedy shareholders even as people living near the Gulf see their livelihoods destroyed and tarballs and dead pelicans multiply on the beaches and marshes. Already, two U.S. Senators, Chuck Schumer (D-N.Y.) and Ron Wyden (D-Ore.) have weighed in, calling it “unfathomable” that the company will continue paying dividends without knowing the extent of the clean-up costs.
Source: Forbes
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Even though oil prices and refining margins weren't that great this past quarter, BP (NYSE:BP) was able to beat earnings expectations again thanks to better-than-expected performance from its upstream production and management's ability to wring out costs. That, and lower expenses related to the 2010 Gulf of Mexico oil spill, are giving management some more flexibility to spend on new development projects.
What's more encouraging, though, is that this quarter didn't get much from its recent acquisition of shale assets. So with these assets now in the fold, let's take a look at what investors can expect for the rest of the year. What is surprising about this past quarter is that just about every market indicator that BP uses for its business -- crude oil realization prices, heavy crude oil differential prices in North America, and overall refining margins -- worked against the company compared with both this time last year and the prior quarter. Based on BP's recent string of results and management's plans to grow its dividend and share repurchases once it gets done digesting this recent acquisition, it would appear that the company is on a decent path to reward shareholders.
Source: Motley Fool
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There once were twin boys that were very different. One had a positive outlook on life while the other was negative about anything he encountered. At age 5 the parents took the boys to see a psychologist to try and understand how twins could be so different. After several sessions the psychologist tried to "cure" both boys. He placed the negative boy in a well-lit room full of candy, pastries, toys and anything else a 5 year old boy could ever want. The positive boy was placed in a dark room full of rancid horse manure.
After about 4 hours the psychologist told the parents he was certain the boys had been cured and they all went to check on them. Not having touched anything in the room, the negative boy was was still sitting where he was left crying and unhappy. Disappointed the psychologist led the parents toward the room where the positive boy was. As they approached the room, they heard a flop, flop, flop sound. They peered through the window in the door and saw horse manure on the walls and on the ceiling. The boy was in the midst of the manure digging as fast as he could. The parents opened the door and asked what he was doing? The boy replied, "With this much poop, I just know there must be a pony in this room and I'm going to find it!"
The increasing costs of transportation has affected all of our lives to one degree or another. Individually, there is nothing we can do about the price of fuel. But like the positive boy above is there something we can do to make the best of a bad situation? I will leave the conservation tips to those more qualified to speak on them.
For several years I have been trying to add an energy stock to my income portfolio. I have some value friends that bought Exxon Mobil (XOM) and Chevron (CVX) about three years ago. They have done well. CVX is up about 80% while XOM is up about 60%. From an income perspective, I couldn't make the numbers work then and the stocks have only become more expensive. Energy stocks can be emotional which leads to volatility.
From mid to late March energy stocks pulled back some. I ran my analysis on XOM and CVX, but still couldn't make the numbers work. On a whim I ran the analysis on BP, and to my surprise they worked. I purchased BP on April 2nd at $62.19/share. At the time of purchase it had a 5.17% yield.
Granted BP is not quite as blue-chip as XOM and CVX, but it gave me the entry into the energy sector that I was looking for at an astounding yield. Since that time BP share price has risen about 15-20% as oil prices have escalated and has out-performed both CVX and XOM. Granted, I got to the party late, but I was able to come on my own terms without having to compromise my standards.
What now? I am sure there is another pony in the rancid fuel crisis, and I am going to find it!
At the time of this writing, I owned shares of BP (1.6% of my income portfolio).
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Fears of a so-called Brexit, or a departure of Britain from the European Union, are really heating up. The country holds a referendum on the issue on June 23, and recent polls have suggested a tight race, with some polls even giving the "leave" camp the lead. This has caused European stocks to decline in recent weeks. The Brexit vote has investors scared about Europe's financial future, but fear creates opportunity for enterprising investors, and fear of a Brexit is no exception. We'll look at three high-dividend stocks that are entering bargain territory because of uncertainty over a Brexit. All three are compelling choices for investors looking to build their dividend-growth portfolios...
Investors should not be overly concerned about a potential Brexit because GlaxoSmithKline (GSK) is a diversified company. It has a global reach, offering its products in more than 150 markets worldwide. Not only is BP (BP) getting hit by Brexit fears, but it also has to grapple with the massive decline in oil and gas prices. While BP has a lot to contend with, it is also a massive business. BP is one of the six oil and gas super majors. Unilever (UL) has had a bad week. Its shares have fallen 6.8%. The good news is that similar to GlaxoSmithKline and BP, Unilever is not overly reliant on the EU. Far from it; Unilever actually derives the majority of its sales from outside Europe.
Source: The Street
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BP (BP) said it understands the importance of its dividend to stakeholders, but said future dividend payouts will be decided by the board. BP currently pays a $3.36 per share annual dividend, which has an attractive dividend yield of 7.8%.
With the oil spill, there have been concerns that this divided is not safe as the cash flow generated by the company will not be sufficient to cover the clean-up and litigation costs plus the dividend. BP has already spent $1 billion on the clean-up, which is expected to be just a fraction of the total cost.
Source: StreetInsider.com
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BP (BP) continues to free-fall to new 52-week lows, despite getting the oil leak under control, as investors worry about a dividend cut and concerns that the worst case scenario, bankruptcy, may play out.
It appears that investors are looking beyond the containment of the leak and staring at the potential 800,000-1 million barrels floating around in the Gulf. The spill has already wrecked havoc on wildlife in the Gulf region and threatens to inflict more damage on the environment and local economies. Analysts see total liability for BP ranging from $10-$40 billion. But with lawsuits flying, these estimates may need to be adjusted.
Source: TheStreet.com
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Energy companies have not been the greatest investments over the last several years. Plunging price realizations have hurt oil companies' upstream results across the board. Levered upstream companies in the U.S. shale oil and gas patch have been hurt particularly badly. This company's shares have risen ~14 percent year-to-date. Stabilizing energy prices should support its upstream results moving forward. I continue to see more upside. An investment yields ~7 percent.
Integrated oil companies like BP (NYSE:BP), ExxonMobil (NYSE:XOM), or Chevron Corp. (NYSE:CVX) have done much better than oil companies that have been more heavily exposed to the upstream sector - think ConocoPhillips (NYSE:COP) -, but they have nonetheless been terrible investments as well. However, big oil companies have started to rebound in 2016, and quite significantly, too. Take a look at BP, for instance, whose shares have risen ~14 percent since January. BP is by far not the only company that has seen an uptick in investor interest after oil prices bottomed out in the 1st quarter of this year. Most big oil companies have profited from a rebound in investor optimism that went hand in hand with stabilizing crude oil prices. The bottom surely is in, don't you think?
Source: Seeking Alpha
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When investors purchase their initial position in a stock, it is usually after their most rigorous research. Once a stock is in their portfolio, some investors relax on the research for subsequent purchases. Each and every time you purchase a stock, you should run it through the same process as if you were buying it for the first time.
Case in point, my income portfolio currently consist of 8 ETFs and 27 individual stocks. Of the 27 individual stocks, only 7 of them would I consider purchasing today based on their valuation. They are listed below along with their buy below price and other information as of 9/12/2008:
AFLAC Inc (AFL) - Yield: 1.65%
Buy Below: $66.75
9/12 Close: $58.60
NPV MMA Diff: $13,075
Concern: The above data assumes a very aggressive dividend growth rate of 20%. With a low yield of 1.65%, AFL needs the high growth rate to be viable. From 1998-2007 the dividend growth rate averaged 22.3% with a low of 11.8% in 2001 to a high of 45.5% in 2007. Another concern is AFL's currency exposure in Japan, where roughly 75% of the company's earnings are derived.
BB&T Corporation (BBT) - Yield: 5.72%
Buy Below: $35.79
9/12 Close: $34.05
NPV MMA Diff: $10,573
Concern: BBT's exposure to the banking industry's current issues with funding and credit quality.
BP Plc (BP) - Yield: 6.29%
Buy Below: $83.28
9/12 Close: $54.79
NPV MMA Diff: $34,463
Concern: Failure to come to an understanding with Russia over its operations in the region (TNK-BP), inability to diversify away from Russia and terrorism could adversely affect BP's future performance.
General Electric (GE) - Yield: 4.40%
Buy Below: $32.69
9/12 Close: $26.75
NPV MMA Diff: $8,103
Concern: Slower-than-expected global economic growth, as well as manufacturing and regulatory problems and the potential for higher delinquency rates in GE's financial services segment.
Paychex Inc (PAYX) - Yield: 3.65%
Buy Below: $49.88
9/12 Close: $34.01
NPV MMA Diff: $149,426
Concern: The highly competitive nature of the outsourcing industry as well as the threat of new entrants into the human resources segment could pose problems for PAYX in the future.
Pfizer Inc. (PFE) - Yield: 6.96%
Buy Below: $27.72
9/12 Close: $18.62
NPV MMA Diff: $56,099
Concern: Patent expirations and pipeline uncertainties could cause PFE significant problems in the future if left unresolved.
Royal Bank of Canada (RY) - Yield: 3.99%
Buy Below: $49.08
9/12 Close: $46.46
NPV MMA Diff: $250,334
Concern: A further weakening of the Canadian economy, which grew at only 0.3% in the June quarter, a prolonged housing-related downturn in the United States economy, and unexpected sharp currency fluctuations.
The buy below price is the minimum of the Mid-2 (as described in Fair Value Data) and price needed to generate the minimum NPV MMA Diff. (as described in Measure What's Important). As always, you will need to do your own research and reach your on conclusion as to appropriateness of adding any of these securities to your portfolio.
Disclosure: Long in all the aforementioned securities.
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Be it junk bonds, real estate investment trusts, master limited partnerships or simply risky common stocks, investors are exposed to more downside in return for yield. That’s not bad in principle, but in practice, investors often pay a dear price for the extra income. That said, within the high-yield space, there are better options than others. Few stocks yielding 6% or more have rock-solid dividends. However, the four I’ve identified here have above average odds. While high-yield stocks probably shouldn’t be the centerpiece of most people’s portfolios, these dividend stocks can add a nice touch of yield to a diversified portfolio. High-Yield Stocks to Buy...
BP plc (ADR) (NYSE:BP) hasn’t been a star performer lately. In fact, BP stock has badly underperformed its U.S. peers in recent years. Blame the Brexit, the ongoing reputation hit from the Deepwater Horizon disaster or whatnot, BP stock simply hasn’t performed. GameStop Corp. (NYSE:GME) stock is yielding so much because investors have concluded the company is a dinosaur that will soon be the next Blockbuster or Radio Shack. That could well happen, but at today’s price, the market is taking too dim a view of the odds. Banco Bilbao Vizcaya Argentaria SA (ADR) (NYSE:BBVA) isn’t the world’s most popular bank. But that Spanish banking giant is an increasingly attractive option, particularly in light of the pro-EU results of the recent French election. Omega Healthcare Investors Inc (NYSE:OHI) had a strong first quarter. The stock, which spent much of 2016 in a funk, rallied sharply. However a 5% sell-off in OHI in recent days has the stock looking like a decent dip buy.
Source: InvestorPlace
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Any investor that understands the merits of asset allocation also understands the importance of including an international allocation in their portfolio. The concept is that in "normal" times there is always a market somewhere in the world rallying. To meet my set international allocation, I have focused on the following four areas of my overall portfolio:I. International Fund in my 401(k)
This International Equity Index Fund seeks to match the performance of the MSCI EAFE Index which consists of approximately 1,200 stocks in 21 developed market countries outside of North and South America, and represents approximately 85% of the total market capitalization in those countries. When compared to other options in my 401(k), I have been generally pleased with this funds performance over time. YTD Return: (-7.2%)II. International Exchange Traded Funds (ETF) Within My Asset Allocation Portfolio
The international component on my asset allocation portfolio is in iShares MSCI EAFE (EFA). EFA seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European, Australasian and Far Eastern markets, as measured by the MSCI EAFE Index. This fund is tracking the same index as my 401(k) above, but with somewhat better results. YTD Return: (-5.1%)III. Individual International Dividend Stocks
It was my desire to have international representation within my income investments, so I first looked to identify good non-U.S. dividend individual stocks that had an ADR trading on the New York Stock Exchange. To identify these stocks I used the International Dividend Achievers™ list. To become eligible for inclusion, a company must be incorporated outside of the United States. The companies must be have an American Depository Receipt or common stock trading on NYSE, NASDAQ or AMEX. Companies must have paid increasing regular annual dividends for five or more consecutive years. What I found is that most companies outside the U.S. follow a different dividend model. Here are some of the differences:
I am sure there are more, but one exception to all the above is BP plc (BP). BP's ADR has paid a consistent quarterly dividend denominated in U.S. dollars.
This produces a very erratic cash stream. Consider Unilever plc (UL). Its ADR paid $0.353 in Nov/07, $0.668 in May/08 and $0.33 in Nov/08.
I need more feedback than this. I would hate to wait a full year before learning a company plans to slash its dividend. Examples of annual dividends include Shenandoah Telecommunications Co. (SHEN), Siemens AG (SI) and Stryker Corp. (SYK).
Most Canadian companies pay quarterly consistent dividends, similar to companies in the U.S. However, they pay the dividends in Canadian dollars, so the currency risk is with the U.S. investor. There is probably much less fluctuation between the U.S. and Canadian dollars than most other currencies. However, it exists. Consider the last five dividends on Canadian National Railway Company (CNI): Mar/08 $0.223, June/08 $0.225, Sep/08 $0.217, Dec/08 $0.189 and Mar/09 $0.200. The quarterly dividend dropped 10% from Mar/08 to Mar/09 in U.S. Dollars while it increased its dividend 10% over the same period in Canadian dollars.IV. International Income ETFs and Income Closed-End Funds (CEFs)
One thought was that a market basket of international stocks in either an ETF or CEF would help mitigate some of the issues above. Many of these created problems of their own. Some such as Alpine Total Dynamic Dividend Fund (AOD) has the option to invest in the U.S. also and when things turned ugly, they brought the cash home. Other funds such as Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) and PowerShares International Dividend Achievers Portfolio (PID) have not performed well as dividend investments. Each has cut its dividend, with PID cutting multiple times. I now question the wisdom of ETFs and CEFs inclusion in an income portfolio, but that is a different discussion.Conclusion
After much consideration, I have concluded that income investing and international securities don't mix very well for all the reasons listed above. Going forward, my primary focus will be on U.S. equities for my dividend income portfolio. I will use my 401(k) and my Asset Allocation Portfolio to ensure an adequate international allocation. As for the securities that I currently hold, I will individually evaluate the appropriateness of them remaining in my portfolio. Consistent with this methodology, I will remove most International Achievers from the Stock Ideas page, leaving only those that I own on have identified as being an excellent income investment.
Full Disclosure: Long EFA, CNI, BP, AOD, ETO, PID
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So far in 2009, the Dividend Aristocrats have under-performed the S&P 500. However there are several dividend stocks that have done quite well and beat the S&P 500 index, and some of those companies just might surprise you!
Below are ten dividend stocks that have out-performed the S&P 500 this year through May 15, 2009:
10. Coca-Cola Co (KO) - Return: 0.4% - Yield: 3.76%
The Coca-Cola Company engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates and syrups worldwide. Risk Rating: Low (1.50) - Analysis
9. Sysco Corp (SYY) - Return: 0.5% - Yield: 4.20%
SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. Risk Rating: Low (1.00) - Analysis
8. BP ADR (BP) - Return: 1.4% - Yield: 7.37%
This supermajor integrated oil company (formerly BP Amoco p.l.c.) is based in London and is the world's second largest publicly owned oil company and the fourth largest U.S. refiner. Risk Rating: Medium (1.75) - Analysis
7. 3M Co (MMM) - Return: 1.8% - Yield: 3.52%
3M Co. is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications. Risk Rating: Low (1.50) - Analysis
6. Paychex Inc (PAYX) - Return: 4.1% - Yield: 4.63%
Paychex, Inc. provides payroll and integrated human resource and employee benefits outsourcing solutions for small- to medium-sized businesses in the United States. Risk Rating: Medium (1.75) - Analysis
5. Intel Corp (INTC) - Return: 5.6% - Yield: 3.69%
Intel Corporation engages in the manufacture and sale of semiconductor chips, as well as in the development of advanced integrated digital technology platforms for the computing and communications industries worldwide. Risk Rating: Medium (1.75) - Analysis
4. Canadian National Railway ADR (CNI) - Return: 7.0% - Yield: 2.24%
Canadian National Railway Company (CNI) operates Canada's largest railroad, linking customers in Canada, the U.S., and Mexico through approximately 20,400 miles of track. Risk Rating: Low (1.25) - Analysis
3. Manulife Financial Corp ADR (MFC) - Return: 8.0% - Yield: 4.78%
Manulife Financial Corporation is a life insurance company with customers in the United States, Canada and Asia. It is the holding company of The Manufacturers Life Insurance Company and John Hancock Financial Services. Risk Rating: Medium (1.75) - Analysis
2. CenturyTel Inc (CTL) - Return: 13.5% - Yield: 9.27%
CenturyTel Inc. provides a range of telephone services in 25 states, with operations concentrated in Alabama, Arkansas, Louisiana, Missouri and Wisconsin. Risk Rating: High (2.50) - Analysis
1. Royal Bank of Canada ADR (RY) - Return: 22.8% - Yield: 4.47%
Royal Bank of Canada (RBC) offers a range of banking and financial services in North America and internationally. Risk Rating: Low (1.50)
Over the same period the S&P 500 (VFINX) was down 1.2%. The returns were calculated using Yahoo's dividend adjusted stock price for December 31, 2008 as the starting point. Some interesting items to note: The list contains four ADRs (3 Canadian, 1 British). RY's dividend has been frozen since November 2007. CTL is the only High Risk stock to make the list based on my risk rating. The top five were less traditional dividend stocks that had been beaten down to low levels.
Short-term performance is never the sole reason for long-term investors to buy. What goes up significantly usually comes back down. Case in point, last years two dividend darlings, Wal-Mart (WMT) and McDonalds (MCD), found themselves in the bottom ten of this list, each down 13.2%.
Full Disclosure: Long in all the aforementioned securities. See a list of all my income holdings here.
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Dividend-paying stocks are often seen as being higher-quality and more stable than their non-dividend-paying counterparts. For income-orientated investors, they are viewed as the next step up on the risk/return spectrum between lower-risk bonds and higher-risk growth stocks. But there is a point at which dividend-paying stocks actually become riskier than the average stock. Just after last year's Gulf oil spill, shares of BP (BP) offered a trailing-12-month dividend yield of 9%.
This would have been a great deal if it was sustainable, after all ExxonMobil's (XOM) yield is less than 3%. But the market was correctly forecasting that BP's dividend would be cut. Another example is New Century Financial, a subprime mortgage REIT that offered a dividend yield of around 18% at the peak of the housing bubble. That high dividend was nothing more than a trap, as the firm filed for bankruptcy when the housing bubble burst.
Source: Morningstar
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I continue to be unhappy with the performance of the income ETFs. The dividends tend to be volatile and unpredictable, which is not what a dividend investor is looking for.
Once again it is the first Saturday of the month, so it is time for a goals/progress update. I am pleased that I can continue to say that annualized dividend income has increased every month since I began tracking it in November 2007. I have one stock that I am certain will either cut or eliminate its dividend in October. I will likely sell it in the next few days and reinvest the proceeds. As noted in past reports, since I am well ahead of my 2008 goal it is unlikely I will fall below it.
My goals were defined in this December 1, 2007 Investing Goals post. Below is an updated version of the table found in the original post.Description Dividend
Income
AnnualizedYield
on Cost2027 Goal 110,000 20.00% 2017 Goal 30,000 10.00% 2008 Goal 4,000 4.90% Dec/2007 3,054 5.00% Purchases YTD 2,386 0.18% Div. Changes YTD 21 0.05% Sales YTD (120) 0.06% September/2008 5,341 5.29% Purchases 165 -0.06% Div. Changes (35) -0.03% Sales 0 0.00% August/2008 5,211 5.38%
The above information covers the current month and year-to-date through the current month.
Click here for a Detailed Historical Progress Update Table.
For the month, annualized dividend income increased $130, and Yield on Cost (YOC) decreased -0.09%. These changes were driven by new purchases and dividend changes (no sales in September). Let's examine each of the these categories:
Purchases: The $165 increase in annual dividend income and -0.06% decrease in YOC related to the following purchases (yield at the time of purchase):
The BP purchase increased my YOC, while the PG and PID purchases lowered it. As noted in earlier updates, I expect for most months YOC to drop since most new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset it.
Dividend Changes: The ($35) decrease in annual dividend income and (0.03%) decrease in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):
The next monthly progress update will be on Saturday, November 8th (I will likely not be ready on November 1st).
(Photo: sanja gjenero)
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Big oil stocks have been decidedly soft across the last year or so. This includes megacap Exxon Mobil (NYSE:XOM), up just 7% in the past 12 months vs. 18% for the S&P 500 Index. BP (NYSE:BP) also is up about 7% in the same time frame, and Occidental Petrolum (NYSE:OXY) is up a mere 2%. But if you believe that a cyclical recovery is in the works for the next few years, then the energy sector might not be a bad place to look. After all, a more robust economic outlook means bigger demand for crude and subsequently bigger profits for oil stocks.
Obviously you’ll have to be patient, especially after some recent news and data regarding China’s slowdown and stagnant U.S. GDP. But what if you can grab a juicy dividend to offset some of that underperformance while you wait, then be in great position once the oil demand picks up? That’s exactly what these three picks provide: Seadrill (NYSE:SDRL), Baytex Energy (NYSE:BTE) and BP Prudhoe Bay Royalty Trust (NYSE:BPT).
Source: InvestorPlace
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